Tesla Inc said on Thursday it would offer a $35,000 version of its Model 3 sedan with a delivery time of two to four weeks, while closing many of its retail stores worldwide, steps designed to increase demand and cut overhead costs for the electric vehicle maker.
SAN FRANCISCO (Reuters) – Tesla Inc said on Thursday it would offer a $35,000 version of its Model 3 sedan with a delivery time of two to four weeks, while closing many of its retail stores worldwide, steps designed to increase demand and cut overhead costs for the electric vehicle maker.
Chief Executive Elon Musk on a conference call said the company would not turn a profit in the first quarter but would return to profitability in the second, CNBC reported. In its fourth-quarter shareholder letter, Tesla had said its “optimistic target” was for a “very small” net profit in the first quarter.
Shares of Tesla fell 3.4 percent after hours. Investors have regularly voiced concerns about whether Tesla would be able to maintain profit margins through cost cutting – such as recent layoffs – and efficiency as it cut prices of its newest vehicle.
Still, the price drop could quell concerns from some analysts that demand for the higher-priced versions of the Model 3 was beginning to dry up, especially after a federal tax credit was cut in half this year.
“Tesla wants to drum up demand,” said Elazar Advisors’ Chaim Siegel. “There was a slowdown in the U. S. as the tax credits dropped. More tax credit hits later in the year too so they are trying to be proactive.”
The announcement comes nearly three years after Musk promised the car at that price to appeal to the mass market. Tesla said its sales would now be online-only around the world and it would close many stores.
“Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6 percent on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected,” Tesla said in a blog on its website bit.
